"The Layer panel shows you a layer before any transforms are applied to the layer. For example, the Layer panel does not show the result of modifying the Scale property of a layer. To see a layer in context with other layers and with the results of transforms, use the Composition panel."

[Kyle Sowden]"I right lick the layer and click "open composition" but it still shows me the full image, not how i've resized it?"

I suspect that when you pre-composed, you chose "Leave all attributes in original comp." This means that your BG would be full-sized, and the scale and position attributes would remain in your original comp.

Select the BG precomp within your main comp, then Alt-drag the original footage onto the precomp's layer in the timeline panel. This will replace the BG precomp with the original media, leaving all attributes untouched.

Now, precompose it again, but this time, be sure to choose "Move all attributes into new composition" to get the behavior you're looking for.